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Technical Retracement Set to Offer New Long Opportunities
Economic
Central Bank
Summary:
The Relative Strength Index (RSI) on the 4-hour chart has reached 71, clearly entering overbought territory, supporting the case for a temporary retracement toward the 100-period MA.
Buy
PENDINGGBPUSD
EXP
1.31140
Entry Price
1.32900
TP
1.30200
SL
1.31882 +0.00243 +0.18%
--
Point
PENDING
1.30200
SL
CLOSING
1.31140
Entry Price
1.32900
TP
U.S. inflation indicators showed signs of stabilization in September. The Producer Price Index (PPI) rose 2.7% year-over-year (YoY), aligning exactly with both forecasts and the August reading, suggesting that wholesale price pressures have leveled off. The Core PPI reading offered a slight relief, easing to 2.6% from 2.9%, falling below the 2.7% expectation.
Consumer activity, however, appeared to weaken. Retail Sales rose 0.2% month-over-month (MoM) in September, a noticeable slowdown from the 0.6% increase seen in August, pointing toward softer consumption trends. Furthermore, the Conference Board reported that household sentiment deteriorated in November, with Consumer Confidence dropping 6.8 points to 88.7 from 95.5 in October.
Federal Reserve Governor Christopher Waller publicly supported a rate cut in December, though he stated that a move in January is less certain. In an interview, Waller emphasized the weakening labor market, noting, "The bulk of the private sector and the anecdotal data we’ve received indicate that nothing has really changed. The labor market is weak; it continues to weaken."
San Francisco Fed President Mary Daly maintained her confidence that the Fed can still guide inflation back to its 2% target, suggesting the risk of an inflationary flare-up is diminished given that tariff-driven cost increases have been more moderate than anticipated. New York Fed President John Williams added to the dovish chorus, stating last Friday that the Fed could still cut rates in the "near term," significantly boosting the implied probability of a rate reduction at the December 9-10 meeting.
Last week's U.S. economic data presented a mixed but resilient picture. September's Non-Farm Payrolls (NFP) increased by 119,000, comfortably beating the 50,000 forecast, although the August reading was sharply revised to a 4,000 loss. The Unemployment Rate rose to 4.4%, hitting its highest level in four years. Wage growth showed moderation, with Average Hourly Earnings rising 0.2% MoM in September, slightly below the 0.3% expectation. Despite the Federal Open Market Committee (FOMC) being openly divided, the collective commentary from key Fed officials has increased the probability of the central bank reducing borrowing costs.
In the United Kingdom, economic signals were equally complex. Retail Sales were weaker than expected in October, and the preliminary November PMIs were mixed, with Manufacturing PMI improving, while the Services PMI edged closer to the neutral 50 threshold. Domestic focus shifts to the upcoming budget announcement by Chancellor Rachel Reeves on Wednesday, who is widely expected to need to raise tens of billions of pounds to meet the country's fiscal objectives.
Technical Analysis
The GBP/USD pair appears to have emerged from the strong bearish impulse that began on September 17th at the local high of 1.3726 and bottomed out at 1.3011 on November 4th. The recent failure to create a new lower low suggests a potential shift toward a bullish recovery. The price has experienced a sharp move upward, which reached the 200-period Moving Average (MA), currently situated at 1.3219, while the 100-period MA is at 1.3120.
The initial rejection seen at the 200-period MA could mark the start of a minor technical correction. This pullback is likely to target the 1.3114 level, which coincides with the next major support zone. Crucially, the 100-period MA is located directly in this area, adding significant confluence. The Relative Strength Index (RSI) on the 4-hour chart has reached 71, clearly entering overbought territory, supporting the case for a temporary retracement toward the 100-period MA. Should the price reach this confluence zone and successfully hold above it, it would signal a renewed bullish interest, attracting buyers for the next leg higher.
Trading Recommendations
Trading direction: Buy
Entry price: 1.3114
Target price: 1.3290
Stop loss: 1.3020
Validity: Dec 05, 2025 15:00:00
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